GameStop Options Bets Seek 300% Rally in Days Despite Share Dip

May 15, 2024

Observations & Insight

Cboe’s Adam Inzirillo talks about Cboe’s data offerings and growth at FIA Boca
JohnLothianNews.com

Adam Inzirillo, the head of data and access solutions at Cboe, spoke to JLN at the FIA International Futures Industry Conference in Boca Raton, FL in March about his experience with electronic trading products before joining Cboe, the lessons he learned in his first months on the job, and the breadth of services Cboe is offering these days. Inzirillo talked with John Lothian News as part of the JLN Industry Leader video series sponsored by Wedbush.

Watch the video »

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Volatility Insight of the Week: Corn skew, as measured by CME Group’s Corn volatility index, is nearing a 9-month high, which suggests options traders are more heavily positioning for upside risk. To learn more about CVOL, please visit HERE.

Lead Stories

GameStop Options Bets Seek 300% Rally in Days Despite Share Dip; Calls betting on rally to $128 are among the most-traded
Carly Wanna – Bloomberg
Even as GameStop Corp.’s shares cratered on Wednesday, some options traders were still betting on a massive leap this week.
Among the most-traded call options were contracts with $100 and $128 strikes — implying, respectively, a near tripling or even quadrupling in the underlying by Friday. The $128 contract had no open position prior to Wednesday, while the volume in the lower strike exceeded the number of outstanding positions.
/jlne.ws/3wCzw0O

Bill Gross Sells GameStop, AMC Options to Cash In on Meme Mania; “Bond King” sold calls and puts on both meme stocks Tuesday; Trade is a bet the shares won’t swing much in either direction
Bailey Lipschultz and David Marino – Bloomberg
Is the erstwhile “Bond King” becoming the options king?
Bill Gross is making a habit of selling options on meme stocks, and his latest trades center on GameStop Corp. and AMC Entertainment Holdings Inc. The legendary investor said he sold calls and puts on the poster children of the meme stock mania, as the shares of both companies take off with speculators using the retail trader favorites as a way to treat the stock market as a casino.
/jlne.ws/3wIMN84

Trump Media Is Hoping to Squeeze Short Sellers. The Stock Still Lags Behind the Memes.
Adam Clark – Barron’s
Trump Media & Technology Group stock was rising early on Wednesday. The owner of Truth Social still appears to only be getting a limited benefit from the meme-stock rally.
/jlne.ws/4dK0TXM

Ex-Jane Street Traders Cite Pay Letdown in Secrets Countersuit; Traders say they led growth of India options business for firm; They left for Millennium after disappointing 2023 compensation
Chris Dolmetsch – Bloomberg
The two former Jane Street Group traders accused of stealing an Indian options-trading strategy for Millennium Management countersued their old firm, saying they left because they were disappointed in their 2023 pay packages. Douglas Schadewald and Daniel Spottiswood said in counterclaims filed Tuesday in Manhattan federal court that they led the growth of Indian options trading at Jane Street from a “relatively small operation” at the beginning of the year to a highly profitable business by the end of 2023.
/jlne.ws/4bFWwv0

Foreigners Most Short on India Stocks Since 2012 on Poll Jitters; Net short positions on index stock futures surge in May; Global funds have pulled out $4 billion this quarter so far
Chiranjivi Chakraborty and David Marino – Bloomberg
Foreign investors are the most pessimistic in over a decade on Indian stocks amid speculation over Prime Minister Narendra Modi’s party winning fewer seats in the ongoing national elections than previously estimated.
Net short positions — measured as the difference between the number of index futures contracts on which global funds are long to those on which they hold a short position — surged to 213,224 contracts, data compiled by Bloomberg showed. The gap is the widest since data going back to 2012.
/jlne.ws/4bgPCwj

AMC meme-stock rally ‘is just pure hype’
James Rogers – MarketWatch
The meme-stock rally that sent shares of AMC skyrocketing earlier this week was driven by hype, not fundamentals, according to Cory Mitchell, an analyst at investing-information website Trading.biz.
“AMC as a company continues to lose money and has for several years,” Mitchell said in a statement Wednesday. “While it is possible an orchestrated group of buyers could continue pushing the stock up, someone will be left holding the bag.”
/jlne.ws/4bhYaDf

Love them or hate them, meme stocks are back
Saqib Iqbal Ahmed and David Randall – Reuters
Meme stocks are soaring again, delighting fans, frustrating detractors and showing Wall Street that the social media force behind the wild GameStop rally in 2021 is still going strong.
The American video game retailer is again the star, shooting up 340% over the last 10 trading days after a string of posts on the X platform from an account linked to Keith Gill, the central figure behind the previous frenzy.
/jlne.ws/4boNJh5

Copper Short Squeeze in NY Prompts Rush to Send Metal to US
Jack Farchy, Archie Hunter and Mark Burton – Bloomberg
Copper futures in New York rallied to a record high after a short squeeze that’s prompted a scramble to divert metal in other regions to US shores. The sudden surge – which has seen Comex futures jump by more than 7% this week – has left metal for July delivery to the New York exchange trading at a record premium over later months, and at unprecedentedly high levels compared with copper on other global commodities exchanges.
/jlne.ws/3UKYmn8

Exchanges

ICE’s ESTR (euro-short term rate) futures reached 100,000 lots of open interest for the first time yesterday, becoming the first exchange to do so, beating rivals CME Group and Eurex, ICE shared on LinkedIn. Futures & Options World reported that ICE now holds a 51% market share in ESTR futures, while Eurex holds 26% and CME 23%. ICE’s ESTR offering can be traded alongside over 16.2 million lots of open interest in Euribor futures and options, which is the largest and most liquid pool of Euro short-term interest rate derivatives globally, ICE said. ESTR options were launched on April 22 to complement the futures offering. ~JJL

Global X Launches Developed and Emerging Markets ETFs on Cboe Canada
Business Wire
Cboe Canada Inc. (“Cboe Canada”) is proud to welcome Global X Investments Canada Inc. (“Global X”) for the launch of two index tracking funds. The new funds offer exposure to international markets and are available for trading today under the symbols EAFX and EMMX in Canadian and U.S. dollars.
/jlne.ws/3yoMNL5

SGX Taps BFix for New CNH Reference Rate and Settlement
The Full FX
SGX FX has unveiled changes to its official reference rate, as well as the timing of the Final Settlement Price (FSP) on its CNH FX futures contracts – moving to Bloomberg’s BFix from WMR and Treasury Markets Association of Hong Kong (TMA) provided reference rates. In a move SGX says is aimed at enabling FX market participants to better manage their exposures between FX futures and OTC spot markets, from today (13 May) it will change the FSP publication time to 2pm Singapore to coincide with the Tokyo 3pm options expiry. This allows, the exchange says, the capture of Asian and European liquidity.
/jlne.ws/4dHKD9G

Regulation & Enforcement

FIA backs international effort to promote “effective practices” for variation margin
FIA
FIA has responded to a discussion paper released by international standard setters that sets out eight “effective practices” for streamlining variation margin in centrally cleared markets. The discussion paper addresses the need for greater transparency and understanding of margin practices at central counterparties, particularly in light of recent episodes of market volatility triggered by the COVID crisis and Russia’s invasion of Ukraine.
Central counterparties generally make calls for variation margin at the end of the day, but they can make intraday VM calls and often do so when markets are volatile. The members of the clearinghouses must fund the calls immediately, and during periods of market volatility, these calls can be very large.
/jlne.ws/4boOjLN

Concurring Statement of Commissioner Caroline D. Pham on Novel U.S. Location Test and FCM Registration
CFTC
I respectfully concur on In re Falcon Labs Ltd.[1] because the cross-border issues raised in this matter re-open decades of settled Congressional intent and well-established Commission interpretation of the Commodity Exchange Act’s (CEA) extraterritoriality and cross-border application to foreign futures and options transactions and the futures commission merchant (FCM) registration requirement, as well as to swaps activity outside the United States. These are cross-border issues that have vast implications for the over $700 trillion notional global derivatives market and the potential to disrupt legitimate activity of multinational trading firms and the end-users that depend on derivatives markets for hedging and risk management. I believe the Commission’s unprecedented interpretation today in an administrative order constitutes a legislative rule that requires notice-and-comment rulemaking pursuant to the Administrative Procedure Act (APA) because it may impose new CFTC registration and trading requirements on scores of non-U.S. legal entities.
/jlne.ws/3QMOacS

Insider Trading Detection: FINRA’s Vital Role in Ensuring Market Integrity
FINRA
Every day, FINRA’s Insider Trading Detection Program uses sophisticated technology and analytics to monitor 100% of trading in stocks, options and bonds for potentially suspicious activity around material news events, resulting in hundreds of referrals to the SEC and law enforcement every year. On this episode, we hear from Sam Draddy, a Senior Vice President of the Market Abuse Unit within FINRA’s Market Regulation and Transparency Services, and Karen Braine, Vice President of the Insider Trading Detection Program, about how they connect trading data, information from public sources and from companies and FINRA firms to pull together actionable intelligence.
/jlne.ws/4dJR4ZB

Technology

The New York Stock Exchange Announces Launch of the NYSE Tech Council; Comprising senior technology leaders of NYSE-listed companies, exchange-led group will focus on thought leadership and best practices in technology
Business Wire
The New York Stock Exchange, part of Intercontinental Exchange, Inc. (NYSE: ICE), a leading global provider of technology and data, today announced the formation of the NYSE Tech Council, a group of senior technology leaders within the NYSE community that will focus on thought leadership and actionable best practices.
The council will be comprised of Chief Technology Officers, Chief Information Officers and other C-suite technology leaders from NYSE-listed companies. With technology evolving rapidly, the NYSE Tech Council’s initial focus will be cybersecurity matters and AI use cases. The NYSE Tech Council will operate in a similar fashion to the other NYSE thought leadership councils, which address topics of interest to the 2,400 issuer-strong NYSE community.
/jlne.ws/3UGyBEQ

Strategy

How to Invest in Options as You Wait for the Fed’s Next Move; Most options investors should wait until major economic reports are released to determine how the market views inflation and interest rate prospects.
Steven M. Sears – Barron’s
Options investing is different.
Stock investors get rewarded for consistently buying stocks through their employer-sponsored retirement plans or systematically investing on their own. Over time, corporate earnings increase, economies expand, and stock prices rise.
/jlne.ws/3wtoueu

What’s the Better Buy: Expensive or Cheap Options?; The meme stock mania made a comeback this week
Rocky White – Schaeffer’s Investment Research
The meme stock craze is back, with usual suspect GameStop (GME) exploding higher earlier this week after one of the key figures in the 2021 mania returned to social media. While GME options are notoriously expensive, they are now paying off in a huge way.
This brings up a trade-off options traders are constantly facing: Should you buy stocks with expensive options (high implied volatility (IV), in which the underlying stock has to make a substantial move to make a profit), or cheap options (in which a relatively small move can yield a substantial return)?
In the analysis below, I’m going to look at data since 2023 to determine whether options buyers are better off with cheap or expensive options.
/jlne.ws/3K8eASo

Roaring Kitty
Cboe (Video)
/jlne.ws/3V3dkFB

Miscellaneous

How the ‘Harvard of Trading’ Ruined Thousands of Young People’s Lives; IM Academy promises a Wall Street education. But instead of riches, many of its members have lost everything.
Alice Kantor – Bloomberg
When Patrice Rechards entered the Rotterdam arena, pop songs were pumping, strobe lights were blinding and she could feel God running through her. She’d grown up in a relatively poor and religious Surinamese-Dutch family in Amsterdam, and she’d always known she had a higher purpose. But it wasn’t until she discovered IM Academy that she figured out what that was. Since joining the financial education platform three months earlier, the 26-year-old had learned how to trade options, crypto, stocks and foreign currencies, all in pursuit of getting rich-and she would soon share those lessons with others. Along with 15,000 other young IM members from all over Europe, she’d made the pilgrimage last spring for a three-day conference to see Chris Terry, their guru and the chief executive officer of IM, in the flesh.
/jlne.ws/44H9Uwy

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